Valuation is cheap + AI risks are limited. JP Morgan upgrades Salesforce, Inc. (CRM.US) to "Overweight."

J.P. Morgan upgraded Salesforce, Inc. (CRM.US) from not rated to overweight, citing attractive valuations and limited risks related to artificial intelligence (AI). The bank also set a target price of $250 for December 2027. The analyst team led by Samik Chatterjee stated, Our positive outlook for the company is based on the expectation that core business will accelerate growth in the second half of fiscal year 2027 (ending January 2027); additionally, we believe that the impact of enterprises adopting cutting-edge AI models and shifts in the competitive landscape should be confined to a small segment of its business. Meanwhile, the current valuation appears low, as the stock price has priced in expectations of further deceleration in growth and deterioration in fundamentals, rather than progress under the companys 2030 fiscal year Rule of 50 framework. The so-called Rule of 50 typically refers to the financial benchmark for tech and software companiesthat the sum of the year-over-year revenue growth rate and profit margin or free cash flow margin must reach or exceed 50%. Analysts believe that the main driver for the stock price to rise from current levels will be a revaluation, with its magnitude and timing depending on the acceleration of revenue growth. However, even without an increase in revenue growth, the stock still has upside potential based on the current low valuation. Analysts emphasized that Salesforce, Inc.s stock is currently undervalued, but its revenue growth rate is close to double digits, profits are leading, and it has established a dominant position in the enterprise customer relationship management (CRM) market. Salesforce, Inc. closed up 4.16% on Thursday, at $201.37, though it has still shed 24% year-to-date. According to media reports, private equity giant Silver Lake Partners is negotiating to acquire human resource software maker Workday (WDAY.US), a development that pushed Workday up as much as 30% and led to a collective rally in AI application software stocks like Salesforce, Inc. The potential Workday transaction will serve as an important indicator of private capital's interest in traditional software assets in the context of AI reshaping the industry. Overall, Wall Street analysts rate Salesforce, Inc. as moderate buy, with an average target price of $238.83, which is 18.6% above the current stock price.